2009 (2) TMI 112 - HC - Income Tax

New unit - Tribunal decided matter in favour of assessee holding that it was not required in case of the company in terms of Section 80-I(7) that the audit repot has to be filed along with the return and such defect also could be cured in respect of apportionment of expenses it was found by the Tribunal that the basis adopted by the assessee was more scientific and AO was not justified in apportioning all the expenses on the basis of the percentage of the turnover - Tribunal after assessing the facts and documents placed before it came to the said conclusion and the said facts cannot be questioned at this stage by the High Court and in fact has to be treated as conclusive

Issues:
1. Acceptability of the method of accounting adopted by the assessee under the Income Tax Act, 1961.
2. Treatment of duty components related to closing stock of finished goods as a deduction under Section 43B.
3. Deletion of a specific addition of Rs. 3,72,76,034.
4. Acceptance of the apportionment of income for a new unit and deletion of additions under Section 80-I for that unit.

Analysis:

Issue 1:
The High Court addressed the first issue concerning the acceptability of the accounting method adopted by the assessee. The Tribunal had found in favor of the assessee, stating that the method of apportioning expenses used by the assessee was more scientific compared to the assessing officer's approach based solely on turnover percentage. The Tribunal also noted that the assessee had provided detailed explanations and documents to support their claim. The High Court upheld the Tribunal's decision, emphasizing that the Tribunal's findings based on facts and documents presented before it were conclusive. The Court ruled in favor of the assessee, dismissing the appeal.

Issue 2:
Regarding the treatment of duty components related to closing stock of finished goods, the High Court did not delve into this issue as the department did not press for a decision on it during the appeal. Therefore, the Court did not provide any specific ruling on this matter.

Issue 3:
The Court also did not provide a detailed analysis of the deletion of a specific addition of Rs. 3,72,76,034 as the department did not press for a decision on this issue during the appeal. Hence, the Court did not offer a specific ruling on this aspect.

Issue 4:
The final issue revolved around the acceptance of the apportionment of income for a new unit and the deletion of additions under Section 80-I for that unit. The department only pressed for a decision on this issue during the appeal. The department argued that the assessee failed to file the audit report along with the return, as required by Section 80-I(7), making the deduction inadmissible. However, the assessee later submitted the audit report before the assessment. The Court, relying on precedent and emphasizing the Tribunal's authority as the final fact-finding body, held that the assessee's action of filing the audit report post-return submission could cure the initial defect. The Court concluded that the assessee had the right to rely on the audit report, and the defect was curable. Therefore, the Court ruled in favor of the assessee on this issue, dismissing the appeal.

In conclusion, the High Court upheld the Tribunal's decisions on the issues raised, dismissing the appeal and ruling in favor of the assessee based on the facts and legal interpretations presented during the proceedings.

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